Courtesy of STRATFOR, analysis (subscription required) of the DRC’s revenue dispute with mining giant China Molybdenum:

In the Democratic Republic of Congo, an ongoing revenue dispute regarding the massive Chinese-owned Tenke Fungurume mine is part of President Felix Tshisekedi’s broader push to increase government oversight of the country’s mining industry. However, this push is more likely to grant the administration short-term financial and political gains than resolve the greater issues of volatility and opacity plaguing Congo’s mining sector. The CEO of the Chinese mining giant China Molybdenum met with Congo’s prime minister last week to discuss the ongoing dispute over billions of dollars Congo’s government claims it is owed in revenue generated from the company’s Tenke Fungurume copper mine. A week earlier, a court in Lubumbashi (the city in southeastern Congo where the project is located) temporarily removed control of the mine from China Molybdenum after a government-appointed panel assessed the Chinese company had undervalued the mine’s reserves and, in turn, undercut the taxes due to the Congolese government, as well as the share of revenue due to state-owned mining company Gecamines. While the commission’s findings are plausible, it is also possible executives from Gecamines inflated the scale of revenue owed by China Molybdenum.

• The dispute with China Molybdenum started in August 2021 when the Congolese government appointed a commission to reassess reserves and resources at Tenke Fungurume, which China Molybdenum has an 80% stake in. The commission included several officials from Congo’s state-owned Gecamines, a minority shareholder in the mining project. According to President Tshisekedi’s deputy chief of staff for economic and financial matters, the central issue the panel was tasked with investigating was whether the number of known reserves at the mine was consistent with the quantity stipulated in the government’s contract with China Molybdenum. In December, the commission petitioned judges to temporarily strip the mine’s leadership of decision-making powers after finding that the Chinese company failed to report the full amount of known copper reserves at the mining site and deprived Gecamines and Congolese tax authorities of revenue. On Feb. 28, a commercial court in Lubumbashi then granted the commission’s request, suspending China Molybdenum from managing the mine and appointing a third-party administrator to run the project for six months while auditors assess the government’s claims. China Molybdenum said that it will appeal the ruling. 
• Tenke Fungurume is one of the world’s largest copper mines, which is also the second-largest national producer of cobalt. Demand for cobalt, in particular, is slated to skyrocket in the coming years due to its crucial role in manufacturing the batteries used to power electric vehicles.

While likely politically motivated, the Congolese government’s review of China Molybdenum’s mining contract also reflects Kinshasa’s genuine concern about foreign companies’ control over the country’s lucrative extractive sector. The results of the panel’s investigation remain private, though it is certainly possible that China Molybdenum reported lower mining yields from Tenke Fungurume to the Congolese government than it acquired, resulting in unreported revenue. But the Tshisekedi administration could also be following in the footsteps of former president Joseph Kabila’s administration by attempting to elicit ”bonuses” from Chinese mining companies in exchange for resumption of operations, without any real intent to increase transparency or substantially reform the industry. There is a general sentiment among average Congolese citizens that foreign countries are taking advantage of the country’s natural resources and failing to uphold promises of investment and infrastructure development while degrading the environment. By increasing pressure on companies like China Molybdenum, Tshisekedi is likely seeking to show voters that he is actively responding to these concerns ahead of Congo’s 2023 elections. Such regulatory pressure could also help Tshisekedi fight off a potential challenge from his predecessor Kabila (who has repeatedly threatened to run for another term in 2023) by continuing to expose mining contracts that supplied the former president and his cronies with kickbacks. 

• Shakedowns have been commonplace throughout Congo’s mining history. During his time in office between 2001-2019, Kabila and his allies reportedly received $350 million from the Chinese-Congolese mining giant Sicomines as a ”signing bonus.” In Transparency International’s 2021 Corruption Perceptions Index, Congo ranked 169 of 180 countries and territories based on levels of perceived public sector corruption.
• On Dec. 3, Tshisekedi replaced the head of the state-owned mining firm Gecamines, Albert Yuma, who was an appointee of Kabila. According to Tshisekedi confidantes, Yuma favored deals with Chinese investors rather than Western counterparts. 
• On Feb. 25, the Congolese government agreed to drop its lawsuits against Israeli billionaire Dan Gertler’s Fleurette Group as part of a deal to take back several mining and oil assets in the country. Gertler allegedly used his close relationship with Kabila and other Congolese officials to exploit mining resources that the government values between $2-3 billion. In 2017, the United States sanctioned Gertler over his alleged ”opaque and corrupt mining and oil contracts,” which Washington estimates deprived Congo of $1.36 billion in tax revenue. 

Increased oversight and reviews of existing mining contracts will likely yield greater revenue for Tshisekedi’s administration and boost its reelection prospects. But despite such efforts, Congo’s mining industry will likely remain highly volatile. China’s near-monopoly on cobalt production in Congo is a key pillar of Beijing’s broader Africa policy. Chinese companies are thus likely to accommodate (or at least entertain) elements of Tshisekedi’s push to win greater concessions from mining firms. The Congolese government will probably, in turn, receive payouts and/or contracts with higher percentage stakes for Gecemines. If Tshisekedi disrupts the relationship with Chinese mining conglomerates to the extent that Beijing throws support behind Kabila in the 2023 election, the absence of campaign funds and opposition from Chinese business interests could complicate Tshisekedi’s reelection bid. Given this risk, however, Tshisekedi will likely avoid such a scenario. The Tshisekedi administration’s reviews of mining contracts have been accompanied by some minor legislative changes, but these changes have also varied widely. Tshisekedi’s desire to increase government control over the country’s mining sector thus doesn’t necessarily signal a greater industry shift; rather, his administration appears more inclined to continue its reviews inconsistently across locations and companies on a case-by-case basis. As a result, the Congolese government’s dispute with China Molybdenum likely portends continued industry volatility and lack of transparency rather than a broader regulatory overhaul of the country’s mining sector.